In the fast-changing health-care business, many worried physicians in the region are banding together and forming medical groups in the hope that being bigger will help them attract more patients.
The mergers reflect an effort by physicians to tap into the surging number of patients who have signed up with health-maintenance organizations, which contract with a select list of hospitals and doctors. HMOs typically don't contract with sole practitioners or physicians in small practices. So by combining practices, doctors believe size and geographical reach will give them clout to win more HMO contracts and get better rates from health insurers and hospitals.
Although many physicians don't want to join big groups, health-care reform is expected to keep pushing managed-care plans like HMOs. That will continue to erode the number of traditional patients who can choose any doctor, which will make it extremely tough for small physician practices to survive.
Stewart Brooks, 49, a Simi Valley pediatrician, figures he lost about 20% of his patients in recent years because employers pushed many of them to join HMOs. After 18 years of working with only one partner, Brooks last May lumped his practice with four small physician groups in Simi Valley and formed Family Health Care Medical Group Inc. That group is now a corporation with 25 salaried doctors, annual revenue of about $14 million and 120 employees, including a chief executive who negotiates contracts with HMOs and oversees the financial management of the corporation.
"To practice in the 1990s, you have to be willing to adapt," said Brooks, who is now seeing many of his former patients because they have signed up with Family Health Care through an HMO. Overall, Family Health Care now has contracts with a dozen HMOs to see patients.
Since joining the medical group, Brooks is working harder, seeing more patients and his income is about 10% higher than a year ago. "I'm happy with the group," he said.
Most medical groups in the San Fernando Valley area and Ventura County are still relatively small, with fewer than 50 doctors each. The biggest medical group in the area is one related to Kaiser Permanente, the state's biggest HMO. Kaiser has more than 300,000 members, or patients, in the San Fernando, Santa Clarita and Antelope valleys, and they are seen almost exclusively by 535 doctors through the Southern California Permanente Medical Group.
The other HMOs in the area do business with various medical groups, including several larger ones: Greater Valley Medical Group in Northridge with 30 doctors; Community Medical Group of the West Valley with 36 doctors, and Facey Medical Group in the Valley with about 65 doctors.
Size is critical because under managed care, HMOs in the area typically pay a medical group between $35 and $40 a month per patient no matter how often that patient comes in for treatment. Because no one knows exactly how many HMO members will make office visits, the larger the patient base, the more effectively a medical group can spread its risk.
Greater Valley Medical Group in Northridge will get bigger this month when it merges with Simi Hills Family Medicine Group, a five-doctor practice in Simi Valley. Greater Valley approached Simi Hills last fall, wanting to expand in that area and drawn by Simi Hills' 10,000 HMO patients.
Alberto Odio, a family physician with Simi Hills, said his group was doing fine financially but decided to join Greater Valley Medical because Simi Hills didn't want to be forced into a merger later with a big group it didn't like. Odio said that the Simi Hills group will still maintain some independence, including being able to refer patients to specialists without having to go through Greater Valley Medical's review procedure.
The merger will also give Greater Valley Medical more than 55,000 patients, most of them HMO members. Still, the group says it needs to get bigger and so is considering forging other alliances. "There hasn't been anybody who hasn't knocked on someone else's door," said Gail DellaVedova, Greater Valley Medical's administrator.
"What we're going through right now is a lot of churning," said John Edelston, a health-care analyst in Woodland Hills. Edelston predicted that in a few years there would be just a few major medical groups, with those that provide high-quality care to a large number of people in the most cost-effective manner having the best chance of surviving.
John McDonald, chief executive of the huge Mullikin Medical Group based in Artesia, which also operates in the Valley, says a doctors' group needs to have at least 75,000 HMO patients to be viable. And the bigger the medical group, he said, the more potential for savings by combining back-office work such as record-keeping and billing.